What does self-insurance mean?

Self-insurance refers to the practice where an individual or business retains risk rather than transferring it to an insurance company. By assuming financial risk, the entity sets aside funds to cover potential losses that may arise. This approach allows them to manage their own risk and potentially save on insurance premiums, as they are not relying on a third party to cover their losses.

In contrast, the other options involve different concepts of risk management or insurance practices. Purchasing additional coverage from multiple insurers typically addresses the need for broader or more specialized coverage rather than self-insurance. Relying solely on government insurance programs does not involve retaining the risk, as it defers responsibility to a governmental entity instead. Purchasing insurance from a non-traditional insurer again involves transferring risk rather than accepting it.

Thus, the essence of self-insurance lies in taking on the financial responsibility for potential losses and preparing for those contingencies by setting aside appropriate funds.